COVID-19: the Coronavirus Job Retention Scheme

The government has announced a range of extraordinary measures to try and prop up the UK economy and safeguard jobs during the COVID-19 lockdown. There are business interruption loan schemes to help firms secure funding, VAT deferrals to aid cashflow issues and special schemes for organisations including charities, tech start-ups and the arts. The importance of the Coronavirus Job Retention Scheme was underlined when 140,000 companies applied to claim wages for over one million UK employees on the day it was launched.

Here, we analyse the Coronavirus Job Retention Scheme and offer some practical guidance on applying for it.

What is the Coronavirus Job Retention Scheme?

The Coronavirus Job Retention Scheme (CJRS) is a temporary scheme open to all UK employers. It offers salary support from 1 March 2020 and will stay open until at least the end of June. The CJRS aims to encourage employers who cannot pay staff wages to not make redundancies. Instead, they can keep employees on the payroll and claim a government grant to cover some of the wage cost.

Who is eligible?

The scheme is open to all UK employers that have created and started a Pay as You Earn (PAYE) payroll scheme on or before 19 March 2020, have enrolled for PAYE online and have a UK bank account. Any entity with a UK payroll can apply, including businesses, charities, recruitment agencies and public authorities.

What can be claimed?

Businesses can claim a grant from HMRC to cover the lower of 80% of an employee's salary or £2,500 per month, plus the associated employers' national insurance contributions (NICs) and the minimum automatic enrolment employer pension contributions on that subsidised wage.

How is the grant claimed?

Employers must calculate the amount for the claim and apply themselves, although an authorised agent can make a claim on an employer's behalf. Claims can only be made online, so employers need to have a Government Gateway (GG) ID and password and be enrolled for PAYE online.

Various information will be required to make a claim, including the employer PAYE reference number, the number of employees being furloughed, the claim period (including the start and end date), the amount claimed (per the minimum length of furloughing of three weeks) and the UK bank account number and sort code.

HMRC will undertake initial checks on the claim, and if they believe the employer to be eligible, pay the grant by BACS to a UK bank account.

The employer must pay the (relevant) employee the full amount of grant received in the form of money, without adjustment for benefits in kind, administration fees or any other costs in connection with the employment. More information on the CJRS can be found here.

Off-payroll workers

Those workers who are not eligible for the CJRS, such as contractors and the self-employed, will need to use the government's Self-employment Income Support Scheme (SEISS).

This scheme will allow businesses to claim a taxable grant worth 80% of trading profits up to a maximum of £2,500 per month for the next three months. It is open to those who have submitted their self-assessment return for 2018/19, have traded in 2019/20, are trading when they apply (or would be except for COVID-19), intend to continue to trade in 2020/21 and have lost trading/partnership trading profits due to COVID-19.

HMRC will contact relevant businesses if they are eligible for the scheme and invite them to apply online. HMRC will aim to contact businesses by mid-May 2020 and will make payments by early June 2020. More information can be found here.

We are here to help and advise you in these difficult times. Additionally, the latest government guidance can be found by accessing the GOV.UK COVID-19 webpage.